🧐 How this 18-year-old student exploited an Index Finance and made millions of dollars

What up, family, 👨‍👩‍👧‍👦,

Seedphrase Daily here 👋, where we give you condensed information about Web3 and NFTs so you can be prepared to make profits!

Today’s estimated research time is 4 hours and 37 minutes condensed into a read time of 4 minutes and 5 seconds. Stay tuned to where we talk about:

• 👀 OpenSea executive indicted for insider training

• 🧐 An 18-year-old student exploited an Indexed Finance’s code and made millions of dollars

• 👏 BAYC selects Tokenproof As Their Official Verification Platform For ApeFest 22

• 👨‍🏫 Why free mints are here to stay

OpenSea executive indicted for insider training 👀

31-year-old Nate Chastain, the OpenSea employee, is facing charges by the FBI on one count of wire fraud and one count of money laundering in connection with a scheme to commit insider trading in NFTs. Using confidential information about what NFTs would get featured on OpenSea's homepage for his financial gain. Just the day before the charges, he made a total of 20ETH.

From roughly June to September of 2021, the indictment says, Chastain would secretly buy an NFT just before OpenSea featured the piece on the front page of its website. Once those NFTs hit the main page, he would allegedly sell them "at profits of two- to five-times his initial purchase price."

Did this anyone notice this executive's suspicious activity?

On September 21, 2021, this Twitter user noticed suspicious activity from multiple wallets. The transactions show the same type of activity with the last front page drop. To cover his tracks, he conducted transactions with anonymous digital currency wallets and anonymous accounts on OpenSea, according to the DOJ, which alleges this happened dozens of times.

How did he get criminally charged when no securities were traded?

OpenSea is a centralized entity that pays taxes, so it's blurring the line… The criminal acts are one count of wire fraud and one count of money laundering, which gives the federal government the ability to prosecute people accused.

What will this do to NFTs or OpenSea?

OpenSea is the largest NFT marketplace, so the chances this affects them drastically negatively is very slim. We can see the same thing happening in the stock market from time to time.

However, Opensea will now move accordingly. They have implemented two new employee policies that ban team members from buying or selling from collections or creators. At the same time, they are being featured or promoted by the company and barring staff from "using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not."

At least they're trying, but these things are bound to happen.

Article

An 18-year-old student exploited an Indexed Finance’s code and made millions of dollars 🧐

Indexed Finance is a cryptocurrency platform that creates tokens representing baskets of other tokens—like an index fund but on the blockchain.

The 18-year-old hacker that goes by Medjedovic looked into the Indexed company on a forum, and he pored over its smart contract and noticed a "mispricing opportunity" in the code. He then saw an arbitrage opportunity to make money and took action!

How did he execute the exploit?

Medjedovic wrote a program that took out a "flash loan" (we talked about it in our last email)—a mechanism in crypto trading that gives users access to funds as long as they're returned within the same set of preprogrammed transactions—worth $157 million. The more UNI Medjedovic bought, the price increased, eventually reaching 860 times its external market price. He spent $109 million worth of tokens on buying up UNI, which was worth only $5.2 million.

Medjedovic's script took out another flash loan consisting of $2.4 million worth of Sushi tokens. And rather than swapping them into the pool, it gifted them to it—a seemingly irrational move that Indexed's algorithm wasn't designed to handle. The "donation" overwhelmed the pool and circumvented its usual trade limit for new tokens.

This allowed his program to trade overvalued Sushi for undervalued DEFI5 tokens freely, then cash those out for the pool's underlying assets, pay back the loans, and keep the rest worth $11.9 million. The attack on the CC10 pool brought the total haul to $16 million.

Is this an ethical way to make money?

The Seedphrase team doesn't agree with how the teen did to make money. Manipulating the market is never an ethical way of trading, even though we see that he found an exploit in the blockchain code itself that lets him finesse the system rather than commuting with the Indexed Finance team and taking the initiative. So big ups to him for that. But after the exploit, the Indexed team was so demotivated that they had no drive to proceed with the project. He was hurting more people than helping. What side of morality do you side with?

Full article

BAYC selects Tokenproof As Their Official Verification Platform For ApeFest 22 👏

The BAYC crew teamed up with TokenProof to securely verify ownership and distribute tickets to ApeFest '22 via an app TokenProof's app.

The Tokenproof app will be the only way to get tickets and enter ApeFest at Pier 17 during NFT NYC. It will allow users to verify that their wallet holds a BAYC or MAYC token.

Is there a risk connecting their wallets?

Typically, we don't advise anyone to connect their wallets to unsecured networks or even third-party apps due to the number of scams in the NFT community. However, in this case, BAYC users won't even be connecting their wallets to receive the tokens. The tokens will be provided once they can verify they're ape holders.

Are you pulling up?

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Why free mints are here to stay 👨‍🏫

As we can see, the entire NFT space has tons of projects that aren't providing real value to holders and are just scams. Want to reduce that risk? The Seedphrase team got you🤝

While most teams generate most of their profit from primary sales, free mint projects are forced to deliver to their holders to make any money from secondary sales. This creates a mutually beneficial relationship between the team and holders. Here are the reseasons we think free mints are here to stay.

1. Everyone Wins

Free-to-mint projects are a win-win for the team and holders. The team is rewarded by creating a quality project and constantly delivering to the community, while early minters are rewarded by being able to enter at a very low price.

2. Risk to reward

The risk to reward with free mints compared to buying an NFT on the secondary market is entirely incomparable. With free mints, you're only paying the gas price, of which you will have the ability to flip on the secondary market for a profit. People making excuses need to wake up!

Stay tuned for tomorrow's email to get the full breakdown on how to find & mint the free mints!

Garden time💐 :

San Francisco will be getting their first NFT restaurant featuring SHO club. Eating in the metaverse 🍽

Kanye West files 17 trademarks to enter the NFT space Another futurist entering the space 🎵🎤

Chipotle is now cryptocurrencies as a payment method. A lot of foodstuff happening. 🌭

That’s a wrap for today! Have you played any free mints yet? We’ll be on the lookout so make sure you stay tuned. Make sure to follow us on Instagram and Twitter for more content! And If you’re looking to find early opportunities to make money, tune in daily! It only takes 5 minutes. Also, read our eBook for free if you refer one friend! (scroll down)

With that being said,

See you tomorrow. ✌️ 💎

Meme of the Day

Damn he probably regrets this one....

Disclaimer

None of this is financial advice. This newsletter is strictly educational and is not investment advice or solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research!